Dead Zone Economics

Elizabeth Sawin
October 1, 2002

The headline in the August 16 issue of Science magazine is ominous — “Dead Zone Grows.” To the right of the headline is a map of the Gulf of Mexico. And drawn on the map, hugging the shoreline, is an irregular green stripe. This is the Dead Zone, an area of the Gulf where oxygen levels are so low that most marine organisms — including crab and shrimp — cannot survive. A primary cause of the problem is fertilizer runoff from farms in the Mississippi River watershed. The runoff stimulates algae blooms. When the algae die, they sink to the bottom and decompose, using up oxygen in the process. This year the Dead Zone is bigger than ever before — 22,000 square kilometers — an area larger than New Jersey.

And of course the Dead Zone is only one of many impacts of agriculture. The other day a visitor was sitting in my office, talking about driving through Kansas, seeing vast tracts of land under irrigation. “Don’t those farmers read National Geographic?” he said. “Don’t they understand about the depletion of aquifers? ”

Then there are the herbicides that accumulate in groundwater, the manure from hog farms that pollutes rivers, and the uncertain effects of genetically modified crops. Take it all together and you might end up concluding it is all the farmers fault. After all, they are the ones out on the land, applying the chemicals and planting the genetically modified seed. But, after four years spent on a project trying to understand the root causes of issues like these in corn production, I can tell you that the problem lies more in the realm of economics than in farmer greed or indifference.

Farmers — like all entrepreneurs in free-market systems — compete to stay in business. And the terms of that competition are well defined. Who can produce the most grain for the least cost of labor, land, machinery, and inputs? The farmers who are the best at maximizing this equation — the most “efficient” farmers — are the most likely to stay in business. As the “least efficient” farmers and farming practices disappear, farming as a whole becomes more and more efficient. This has brought enormous innovation and gains in productivity. Yields of corn have risen from about 30 bushels per acre in 1940 to around 120 bushels per acre today.

That’s the whole point, you might be thinking; that’s what our market system is supposed to achieve for us. But what about the Dead Zone, the herbicides in groundwater, the manure in streams? Wouldn’t a really efficient solution to human needs include a healthy fishery downstream of our farms, and plenty of pure water beneath them? Why hasn’t our free market system — our cherished tool for finding solutions to human needs — delivered more on these fronts?

After interviewing farmers, farm advocates, environmentalists, and policy makers, my colleagues and I have concluded that part of the answer lies in our society’s definition of efficiency. The kind of efficiency that determines whether a farmer earns a profit and manages to hold on to his land is a very particular efficiency. It is the efficiency of producing just one thing — a crop — with the frugal use of a few things — labor, land, equipment , and inputs, like seed and fertilizer. There is nothing in this equation about producing health in the Gulf of Mexico or about being frugal with water quality. In the equation that determines who survives in farming, the Gulf of Mexico is invisible. And that is why the Gulf of Mexico has a Dead Zone and why that Dead Zone is growing.

It doesn’t have to be this way. There is nothing in our current definition of efficiency that is a natural law. We could re-orient our thinking to expand what we reward. We could begin to think of clean water or regenerating soil as products of farming in addition to wheat or barley. Many European countries have done just that. Farmers and farmland are seen as producing beauty, water purification and biodiversity as well as crops, and government programs offer payments for these other kinds of productivity.

We could expand the list of things we want our farmers to be frugal with. There is more that needs efficient use than labor and capital. There is also soil, and water and community quality of life. Getting our markets to work for us requires figuring out how to reward the careful use of these resources.

It’s not that we lack the policy instruments. Economists already have a toolbox full of suggestions, from stewardship payments to pollution taxes. But we won’t make use of these tools until we stop expecting that competition on only a few grounds can somehow deliver broader goals. That is like a university selecting its freshman class based only on SAT scores and assuming that the students will somehow excel at football and chamber music.

These are not things to be left up to chance. If you want football and music — or healthy ecosystems — these goals must shape the criteria that determine who is successful enough to participate in your university, or in your farming system. The university’s admissions criteria must give some credit to music or athletic skill, and we need to use those tools of taxes and incentives to make sure that the most profitable farmers are the ones whose farms produce healthy food, wildlife habitat, accumulating inches of topsoil, and exiting streams full of clear water.

When our policy is informed by such an expanded definition of efficiency, oxygen levels will rise once more in the Gulf, and the headlines will proclaim, “The Dead Zone is Shrinking.”